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U.S CPI Remained Unchanged in April – May Report

May 16, 2012

The Bureau of Labor Statistics published yesterday the recent report of the U.S CPI for April 2012. According to the publication the consumer price index remained unchanged and in annual terms the US CPI rose by 2.3%. The consumer price index sans food and energy edged up by 0.2% during April and 2.3% in the past 12 months.

The prime reason for the result in the U.S. consumer price index was related to different directions of the main components of the CPI: On the one hand, the energy index tumbled down by 1.7% (M-2-M) during April; in annual terms the energy index rose by 0.9%; among the energy products, the fuel oil led the fall with a 2.6% drop during the month. On the other hand, the food index increased during April 0.2% and by 3.1% in annual terms.

The core U.S inflation (CPI sans energy and food) edged up by 0.2% during April and by 2.3% during the past 12 months. This figure coincides with the recent U.S PPI report, in which the core PPI also increased by 0.2% during April.

In the previous month the March 2012 CPI rose by 0.3% and the core CPI edged up by 0.2% (M-2-M).

The chart below shows the development of the (M-O-M) percent changes of the U.S. CPI during 2011-2012.

This news doesn’t seem to have much of an effect on the direction of the U.S dollar against other currencies, since this news doesn’t show much of a shift in the U.S inflation. Finally, if the U.S CPI will continue to be stable in the months to come, this situation might raise the chances of another QE intervention by the Fed, at least from the inflation point of view. This scenario also makes it more plausible that the FOMC will keep its monetary policy of low interest rates until late 2014.